GB00_erste lage_E - Erste Group

While the agreement is in force (until 2005 at the latest), the loans and advances involved in
these ring-fencing agreements will continue to be reported in the ČS balance sheet, are subject
to certain conditions and are managed by ČS pursuant to specific rules and regulations. KOB re-
imburses the interest costs of this portfolio to ČS and also makes premium payments for proper
credit management by ČS.
In addition, until 30 June 2001 commercial loans (and certain other loans and advances) of Česká
spořitelna that were assigned to the “standard” and “satisfactory” risk categories on 31 December
1999 can be recategorised and included in the ring-fencing agreement provided Česká spořitelna
and KOB agree that they were assigned to the wrong category (as of 31 December 1999).
If no agreement can be reached on the classification of certain loans or commitments, such cases
shall be referred to the auditors of both parties for their evaluation and—if warranted—submitted
to an independent auditor for a final decision.
As part of the first-time consolidation of Česká spořitelna effective 3 August 2000, a total of EUR
122 million were allocated for adjustments to the current fair values and provisions for expenditures
and investments agreed to in the purchase agreement.
Of this amount, EUR 28 million were originally foreseen within the scope of initial consolidation
for adjusting the fair values of properties used for banking operations. In the course of further
analysis after the time of acquisition, the value of these properties was ascertained, as a result
of which provisions for the fair value adjustment were no longer necessary.
Nevertheless, when the accounts were prepared the valuation of existing deferred tax assets
were re-examined. Due to the uncertainly over future trends, particularly as concerns risk provisions
that are recognised for tax purposes and receive restrictive tax treatment under current tax
law in the Czech Republic, Erste Bank decided to reassign the fair value adjustment for property
used for banking operations made at the time of initial consolidation to the valuation of deferred
tax assets in the same amount (EUR 28 million), as a result of which there was no change in the
total amount of goodwill resulting from the Česká spořitelna acquisition.
All in all, the difference between the purchase price and prorated equity and all adjustments at
the time of acquisition resulted in goodwill of EUR 223 million, which will be written off over a
period of 15 years.
Effective 30 September 2000 Erste Bank Sparkassen (CR) a.s., Prague, sold its banking operations
to Česká spořitelna.
Erste Bank 2000 75